Gold Breaks as Bitcoin Rises 7% in September on Recession

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As the economic outlook worsens, central banks and institutions are increasing their gold purchases significantly. A declining U.S. dollar index has made gold more attractive to foreign investors, boosting demand.

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With gold up 28 percent in 2024 and bitcoin hitting its own record for the best year since 1979, the gold rush could signal a different outlook for the economy even as the US Federal Reserve continues to push for a “soft landing.”

Following the Fed's 0.5% interest rate cut on September 18, gold rose to $2,648 an ounce today, driven by a weaker US dollar and rising global geopolitical tensions.

As the US dollar index (DXY) weakens and depreciation slows, the weaker dollar makes gold more attractive to foreign investors. These conditions They reflect the financial crisis of 2008, when gold rose as a safe haven amid growing economic uncertainty.

Gold's retreat reflects the concerns of investors, many of whom are looking for safe havens amid growing economic uncertainty. During the 2008 crisis, US government spending was 43 percent of GDP—gold became a hedge against inflation and instability.

The geopolitical landscape, with ongoing conflicts in Ukraine, Israel and the upcoming US presidential election, has fueled demand for gold. Central banks have tripled their gold purchases, especially since the start of the Ukraine war, according to a Goldman Sachs report predicting that gold could reach $2,700 by early 2025.

Meanwhile, Bitcoin, often referred to as “digital gold,” is up 6% after the Fed's rate decision and 7% in September alone — historically Bitcoin's worst performing month.

Crypto analysts predict that Bitcoin may follow gold's lead, with some predicting an all-time high for Bitcoin before the end of 2024, positioning both assets as key inflation hedges in an uncertain period.

This rally in gold and Bitcoin came as Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell continued to express confidence in reaching a “soft landing.” Gold's meteoric rise, along with Bitcoin's rally, reflects growing doubts in the market about the Fed's ability to stabilize the economy, indicating that it is far from a “soft landing”.

A combination of economic uncertainty, a weakened currency and massive government spending suggest the US economy has a long road ahead. Investors are turning to gold and bitcoin as safe havens, worried that the Fed's actions may not be enough to pull the country out of the turmoil.

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